Most systems for processing the sale of products are seller-driven, whereby the seller prices, packages, configures and offers the product for sale, and the buyer decides whether or not to accept the seller's offer. In a buyer-driven system, however, the buyer dictates the terms of the offer and one or more sellers decide whether or not to accept the offer. A "help wanted" advertisement, for example, is a buyer-driven inquiry since the employer is looking to locate and buy the services of a qualified employee. The inquiry is advertised to a large number of potential employees, who may respond by submitting their resumes to the prospective employer.
Priceline.com, Incorporated of Stamford, CT is a merchant that has successfully implemented a buyer-driven system for the sale of products such as airline tickets and automobiles. Priceline.com utilizes a Conditional Purchase Offer (CPO) Management System, described in U.S. Pat. No. 5,794,207 and International Application Number PCT/US97/15492, that processes Conditional Purchase Offers and/or Binding Conditional Purchase Offers (Binding CPOs) received from individual consumers. These CPOs contain one or more buyer-defined conditions for the purchase of goods or services, at a buyer-defined price. The Binding CPOs are typically guaranteed by a General Purpose Account, such as a debit or credit account, and thereby provide sellers with a mechanism for enforcing any agreement that may be reached with the consumer. The CPOs are provided by the CPO Management System to sellers, either directly or using seller-supplied rules, for individual sellers to either accept or reject. If a seller accepts a Binding CPO, the CPO Management System binds the buyer on behalf of the accepting seller, to form a legally binding contract.
Thus, the CPO Management System empowers individual consumers to obtain goods and services at a price set by the consumer. The CPO Management System provides numerous commercial advantages to sellers as well. For example, the CPO Management System permits individual sellers to effectively sell excess capacity when actual demand fails to meet forecasted demand. In particular, the CPO Management System provides an effective mechanism for sellers to be confident that if they accept a consumer's offer, the consumer will purchase the requested goods or services at the agreed-upon price, and not just use the information to ascertain the seller's underlying level of price flexibility, which, if known to a seller's competitors or customers, could dramatically impact the seller's overall revenue structure.
One of the major advantages of the CPO Management System as it applies to, e.g., the purchase of airline tickets through priceline.com, is its ability to tap into the market of "below-the-fare-line" consumers. This is a group of consumers who will not pay a published fare and will thus base their decisions to travel solely upon their offers being accepted. However, oftentimes these consumers' offers are found to be unacceptable and are subsequently rejected by the airlines. In an effort to make sales to these consumers, customer service representatives ("CSRs") at priceline.com may contact them and propose counter-offers, sometimes including supplemental products (e.g., "We can't sell you tickets for your offered price of $300, but we can sell you tickets and a hotel room for the total price of $500"). Unfortunately, this method of counter-offering is expensive and potentially cost-ineffective because counter-offer decisions cannot be made efficiently. Because the CPO Management System has only limited information available on which to base its counter-offer decisions (i.e., the CPO conditions), it is difficult to determine which consumers are likely to accept counter-offers and on what specific terms. Thus, there exists a need to leverage the asset-value inherent in rejected offers by efficiently making counter-offer decisions.
Another method used to make low offers acceptable is to create "package counter-offers" before consumers' offers are presented to and subsequently rejected by the sellers. Here, consumers are required to purchase product(s) in addition to their originally sought-after products for an adjusted total price. When an additional product is introduced, a package counter-offer is created comprising the original product and the additional product for a single proposed price, thus combining the individual prices of each of the underlying products. In determining the single proposed price, the CPO Management System blends the additional product's price in order to make the original offer acceptable. For example, if a consumer submits an offer to purchase airline tickets for $100 and the CPO Management System determines that the consumer's offer is too low but would be acceptable for $125, a package counter-offer is created with an additional product, such as a rental car. If the rental car can be purchased from a seller for $75, the CPO Management System transmits the package counter-offer including the airline tickets and the rental car to the consumer for a package price of $200.
Although the package counter-offer method is effective for increasing sales by decreasing seller rejections, a shortcoming is that there is no way for the CPO Management System to determine which additional product(s) are appropriate to offer as complimentary products for each particular consumer. For example, if a consumer submits an offer for airline tickets, priceline.com knows that hotel rooms and rental cars are typically appropriate products to include in a package counter-offer. But if that consumer has already booked hotel accommodations but needs a rental car, a counter-offer opportunity is wasted if the CPO Management System redundantly counter-offers the consumer a package including a hotel room instead of a rental car. Thus, there exists a need to leverage counter-offer opportunities by counter-offering individual consumers with additional product(s) that they actually need and are therefore more likely to accept as part of a package counter-offer.
Another method utilized to make low consumers' offers acceptable before the offers are rejected is to subsidize the offers. For example, if a consumer's offer of $100 for an airline ticket through the priceline.com system is low in comparison to the available fare of $125, the CPO Management System will make such a determination and apply a subsidy amount of $25 to the offer to make it more likely to be accepted by a seller. However, while this method is effective to sell low-demand, perishable inventory to below-the-fare-line consumers, there is no way for the CPO Management System to allocate its finite subsidy budget in a cost-effective manner. For example, it would be better for the CPO Management System to subsidize offers from consumers who will purchase tickets from a competing air travel service if their offers get rejected because priceline.com will gain market share by diverting sales from competitors. On the other hand, there is no market share advantage by subsidizing offers from consumers who are not likely to purchase tickets from a competitor. Therefore, a need exists to increase the acceptance rate of consumer offers while simultaneously managing a finite subsidy budget in a cost-effective manner.